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Rating agency ICRA in its latest report has said that premium hotel inventory is likely to increase 3.5-4 per cent in the current fiscal (FY23) with an addition of around 15,500 rooms amid recovery in demand. It also said the demand recovery has been better than expected in the last few months, aided by domestic leisure travel, pent-up demand from meetings, incentives, conference and events, including weddings, and gradual recovery in business travel and foreign tourist arrivals.

According to the report, the healthy demand uptick has resulted in a pick-up in new supply announcements over the last 4-5 months. Further, construction activity in projects stalled post Covid has also commenced recently. However, it said the hotel supply pipeline is expected to grow only at a 5-year CAGR of 3.5-4 per cent, adding approximately 15,500 rooms to the pan-India premium inventory of 94,800 rooms across 12 key cities in India. It stated that the current inventory growth is significantly lower than the growth of approximately 18 per cent witnessed during FY 2009-2013 period after the global financial crisis.

The report further said pan-India premium hotel occupancy is expected to be 68-70 per cent while the average room rate is projected to hover around Rs 5,600-5,800 this fiscal. It noted that till October 2022, occupancy stood at 62-64 per cent while the average room rate for the first seven months of FY23 was only at an 8-10 per cent discount to pre-Covid levels and stood at Rs 5,000-5,200. It added that the improved operating leverage along with the sustenance of cost-optimisation measures will support margins and cash flows for hotel companies.